Gross value Addition (GVA)

What is Gross Value Added ? 

  • The term that is used to denote the net contribution made by a firm is called its value added 
  • The raw materials that a firm buys from another firm which are completely used up in the process of production are called ‘intermediate goods’. 

Therefore 

Value added of a firm = value of production of the firm – value of intermediate goods used by the firm. 

  • Gross value added (GVA) is defined as the value of output less the value of intermediate consumption. 
  • Value added represents the contribution of labor and capital to the production process. 
  • When the value of taxes on products (less subsidies on products) is added, the sum of value added for all resident units gives the value of gross domestic product (GDP). 
  • Thus, Gross value added (GVA) = GDP + subsidies on products – taxes on products 
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